- Cafe Hayek - https://cafehayek.com -

Quotation of the Day…

Tweet [1]

… is from page 99 of Thomas Sowell’s 2018 volume Discrimination and Disparities [2] (original emphasis; footnote deleted; link added):

Similarly, people who discuss raising the government-mandated minimum wage talk as if this would automatically mean having the lowest-paid workers’ income rise, from $10 an hour to $15 per hour, for example. In reality, for millions of inexperienced and unskilled young workers, it can mean that the wages they receive in fact fall from $10 an hour to zero, when they are unable to find jobs. Even those who have and keep their jobs can nevertheless end up with lower incomes, as a result of having fewer hours of work available in the wake of a minimum wage increase, as a National Bureau of Economic Research study [3] showed happened in Seattle in 2016, for example.

DBx: Spot-on.

An additional negative effect of government-mandated minimum wages is that they worsen the non-wage features of jobs held by low-skilled workers. Some instances of this worsening are easier for third parties to observe and measure than are other instances. If, for example, employers reduce the amount of money they pay for employees’ health-insurance premiums or stop offering employee discounts to their workers, these negative effects are easy to observe and to measure. Or at least these negative effects are easier for third parties to observe and to measure than are negative effects such as, for example, employers becoming less lenient in allowing workers to text and make personal phone calls while on company time, employers having fewer social events for employees, and employers keeping their workplaces less clean and less safe.

Anyone who talks of government-mandated minimum wages in reality (as opposed to in some textbook model of monopsony power) as having no negative effects on any low-skilled workers hasn’t thought deeply enough about the matter. Even if all employers of low-skilled workers have unassailable monopsony power over their workers, because there are margins other than wage rates on which employers can adjust to minimum wages – and because minimum wages at best do nothing to reduce monopsony power – minimum wages are destined to harm some low-skilled workers.

Comments